Arbitration post-Brexit

The Lord Chief Justice a couple of days ago gave a bullish speech in Beijing about London as an arbitration centre post-Brexit. Despite the self-serving nature of the speech, one suspects he may well be right. At least post-Brexit we should with a bit of luck get shot of the ECJ control over jurisdiction; be able to abandon The Front Comor [2009] EUECJ C-185/07, [2009] 1 AC 1138 and go back to issuing anti-suit injunctions against Euro-proceedings that infringe London arbitration agreements; and possibly get rid of tiresome Brussels I provisions that make life difficult for P&I clubs which want to insist on arbitrating here (see, for details, this post). But as usual, to know the details we have to wait and see.

Exclusive jurisdiction: where is the obligation not to sue to be performed?

A nice point of potential importance in conflict of laws: see AMT Futures Ltd v Marzillier & Ors [2017] UKSC 13 today. If someone in Germany has a contract with you providing for exclusive jurisdiction in England and they nevertheless sue in Germany, do the English courts have jurisdiction under Brussels I to hear your claim for damages? Against the other contracting party, clearly Yes. But what if you want to sue a third party for bankrolling the action and thereby inducing the breach of the obligation? Is the harm suffered by you suffered here within Art.5.3 (Art.7.2 Recast)? No. The relevant obligation is to be construed as an obligation to refrain from suing in Germany, not an obligation to sue in England if you sue at all.

Another interesting point raised in the case was whether entertaining an action for breach of the obligation not to sue in Germany was itself contrary to the full faith and credit ethos lying behind the Brussels regime (as denied in West Tankers v Allianz [2012] EWHC 854 (Comm)). The SC refused to grasp this hot potato: perhaps wisely, since it may well not matter after Brexit.

The proper place to sue: holding companies, etc

Another transnational tort claim against a UK holding company on the lines of Chandler v Cape plc [2012] EWCA Civ 525; [2012] 1 WLR 3111 was dealt with today by Laing J: see AAA v Unilever Plc [2017] EWHC 371 (QB). Employees and others connected with a sub-subsidiary of Unilever in Kenya  suffered political violence at the hands of thugs after the 2007 Kenyan election. They sued not only the Kenyan company involved (essentially the Brooke Bond tea operation), but Unilever, alleging failure by it as holding company to make sure its local operation took care to protect them. Unilever sought to get rid of the action, on the basis of (a) Act of State (since the actions, or rather inactions, of the Kenyan police were in issue); (b) forum non conveniens; and (c) case management grounds. The attempt failed. On (a) it had to founder since Belhaj v Straw [2017] UKSC 3; [2017] 2 WLR 456 and nothing more needs to be said. On (b) her Ladyship was forced by Brussels I Recast, Art.4 and Owusu v Jackson [2005] QB 801 to refuse a stay, even though most of the connections were with Kenya, and indeed there were fairly clear indications that the claimants were only suing Unilever here in order to be able to sue the Kenyan subsidiary in the English rather than the Kenyan High Court. What is more significant is the decision on (c), the case management argument. Unilever relied on a throw-away line of Coulson J in Lungowe v Vedanta Resources Plc [2016] EWHC 975 (TCC) at [84] to argue that there might be a stay if there was no serious issue to be tried between the claimants and Unilever. But even though it was found that there was indeed no serious issue to be tried between the claimants and Unilever, Laing J refused to go down this road, regarding it as an unjustified attempt to sideline Owusu v Jackson in the absence of pending proceedings abroad such as would justify a stay under Brussels I Recast, Art.34. The only way Unilever could get rid of the action was by showing, in the old-fashioned way, that it was bound to fail.

This is an unfortunate result for defendants sued on dubious causes of action in England, if only because it is much more time-consuming and expensive to show that an action must fail than to argue that it is being brought in the wrong place. One suspects that this will add to the pressure on the government to include in its Brexit shopping-list a wholesale revision of the Brussels I provisions on jurisdiction. Indeed, if this were done, one attraction of companies setting up shop here would be precisely the protection against inappropriate lawsuits that the current EU law pointedly fails to give.

English law and jurisdiction post-Brexit

Evidence has recently been given to the EU justice sub-committee of the House of Lords that Brexit may scare off foreign businessmen from choosing English law and jurisdiction in favour of the Netherlands, Germany or Singapore. Sir Oliver Heald, Justice Minister, has pooh-poohed the idea. We suspect that, even discounting political hype, Sir Oliver may well be correct. Provided that arrangements are made for mutual recognition and enforcement of judgments between the UK and EU – something in all parties’ interests, even if the preservation of the whole of Brussels I is not – it is difficult to see how Brexit will change anything.

Article 50. Supreme Court confirms that Parliament must pull the trigger.

By an 8-3 majority the Supreme Court has just ruled that Parliament must authorise the giving of notice to leave the EU under article 50, so upholding the decision of the divisional court last December.

The Supreme Court also unanimously held  that the UK Government was not legally compelled to consult the devolved legislatures before leaving the EU.

After Article 50, now article 127?

 

 

First there was article 50 and the issue of whether it is for Parliament to authorise the process of leaving the EU – which occupied the Supreme Court last month. Now a similar set of proceedings have been issued arguing that leaving the EU will not automatically mean leaving the European Economic Area and this will have to be done pursuant to s. 127 of the Agreement on the European Economic Area. This provides:

 

Each Contracting Party may withdraw from this Agreement provided it gives at least twelve months’ notice in writing to the other Contracting Parties.

 

However, article 126 applies the agreement to the territories to which the treaty establishing the European Economic Community is applied and under the conditions laid out under that treaty. It is, therefore, likely to be the case that the UK’s membership of the EEA would terminate automatically on leaving the EU.

 

Brexit may mean Brexit, whatever that May mean, but it certainly means good money for lawyers.

 

Government loses Article 50 Challenge. Brexit is for parliament not the Crown.

Ten minutes ago the Divisional Court released its judgment in the judicial review proceedings brought by Gina Miller to determine whether or not the Prime Minister can give notice to leave the EU under Article 50 of the TEU without  the authorisation of Parliament. The Lord Chief Justice has declared that the government does not have the power under the royal prerogative to give notice under article 50. A government spokesman has indicated that the judgment will be appealed in which case it will leapfrog to the Supreme Court where a hearing has been pencilled in for early December.

 

Interesting times.

Brexit judicial review latest.

 

 

Lord Chief Justice Thomas has now started hearing the judicial review proceedings brought by investment manager Gina Miller to determine whether the Prime Minister can give notice under article 50, without the prior authorisation of  Parliament. Any appeal will be leapfrogged to the Supreme Court to enable a final decision to be given before the end of the year on this matter of fundamental importance.

Everybody out! Brexit by April 2019

 

 

The Prime Minister today has announced her intention (a) to trigger article 50 by the end of March 2017 at the latest and (b) to introduce a Great Repeal Bill to convert all EU legislation into UK law on the date of leaving the EU and to repeal the 1972 European Communities Act 1972 at the same time. Doubtless, there will be scrutiny of the EU legislation involved with a view to amendment or repeal post Brexit – a task that could keep government lawyers busy for years beyond our departure from the EU.

 

There have been predictable noises off about a so-called Scottish veto on the Bill but as stated in a previous blog it is very unlikely that this exists and the most that could be done would be for SNP Members of Parliament to vote against it in Parliament.

 

Watch out, too, for revival of the judicial review proceedings commenced earlier in the summer on the issue of whether article 50 has to be triggered by Parliament or whether the Prime Minister may go it alone under the Royal Prerogative. Whatever the first instance decision it is inevitable that there will be a leapfrog appeal to the Supreme Court. Lots for lawyers to look forward to in the new year.

Direct actions against insurers — EU-style

P&I clubs already have their issues with the EU, as regards (for instance) Solvency II: see our post here. Now another cloud looms. P&I clubs based in the UK jealously guard their English law and jurisdiction clauses. But where a direct action is brought in an EU state, is the jurisdiction clause compatible with EU law?

The point has arisen in Denmark and is headed for the ECJ. A Danish tug, entered with Navigators Management (UK) Ltd, caused mayhem in the Danish port of Assens. The tug’s bareboat charterers being insolvent, the port sued Navigators in Denmark under the Danish direct action statute: Navigators relied on the English law and jurisdiction clause and insisted on being sued in England. The port relied on Arts 10 and 11 of Brussels I (equivalent to Recast 12 and 13, there being no relevant difference between the two here), saying that in matters of insurance the club could be sued in Denmark as the place where the damage occurred. Navigators said that Art.13 (recast Art.15) allowed the relevant jurisdiction to be ousted by agreement. The port retorted that this was all very well, but a term in the contract between the charterers and the club could not in the nature of things be binding on it as a third party. Whereupon the club riposted that if the port wanted the advantage of the contract between it and the charterers then the port had to take that contract warts (i.e. jurisdiction clause) and all.

At this stage it’s not clear why the port wanted so much to sue in Denmark. We can only presume that, despite the cover being written under English law, Danish law would apply to the exclusion of English law to at least some aspects of the direct claim and deprive the club of some advantage or defence otherwise available.

What the ECJ will hold is anyone’s guess. One hopes it will side with the insurer: one way P&I clubs keep costs down and liabilities in check is to avoid entanglements with foreign law as far as possible, and keep in reserve the possibility of insisting on “pay to be paid” provisions — something many EU jurisdictions take a poor view of. There’s certainly some logic on that side. In particular, the right under Art.13 to exclude jurisdiction is specifically stated not to apply to direct personal injury claims against liability insurers: something that seems to suggest that but third party direct claims in general can be excluded. On the other hand, logic (if one may say so) has not always been the ECJ’s strong suit when the court has been presented with the opportunity to extend EU control over commercial activities.

If the decision goes against Navigators, we may see yet another item added to the already long UK Brexit wish-list.

Many thanks to HFW (who give the arguments in detail) for the tip-off. More detailed coverage of the affair (in English) from the Copenhagen law firm Gorrissen Federspiel can be found here.